Gold Market Update—As We Go From Deflation to Hyperinflation
The comments below are an edited and abridged synopsis of an article by Clive Maund
Deflation and depression are with us now; just ask some of the 30 million people who are unemployed in the US.
The Fed is creating hyperinflation, because it would rather have that than deflationary implosion; it lets the Fed continue transferring wealth from the rest of society to the 1%, and it defers complete systemic collapse for a longer. The Fed has created a staggering amount of new money since this crisis began, and its balance sheet has gone exponential, guaranteeing hyperinflation, which will begin when the velocity of money picks up. Currently, there is none because the economy is dead, but if you print countless trillions of dollars, things will start moving again.
Creating more money does not create wealth: if you triple the amount of money, you have three times the amount of money competing for the same (or fewer) goods and services, which drives prices up. Money creation has already driven stocks back up; they have recovered most of their losses triggered by the virus scare.
So it’s no surprise that gold is setting up for an advance that will take it to the stratosphere.
The crisis won’t end the debts that have built up, and associated derivative positions, are written off. Debt—corporate, government, municipal—and all bonds are worthless and will be marked to market by default or hyperinflation. If you own these, get rid of them before they decline to zero. The crisis won’t end until this sludge is eliminated—the creditors will end up with nothing. The main reason for money creation by the Fed is to backstop the credit markets in order to stop rates rising, which would cause debt to compound at a catastrophic rate, but it seems to be alright with the idea of eliminating the debts by taking the hyperinflationary route.
With fiat heading towards its intrinsic value of zero, the choices for those wanting to preserve their wealth are rapidly narrowing towards two things: gold and silver. Gold is transportable and practical, and silver especially so.
Maund discusses the 2-year, 10-year and 13-year charts, and the latest COT readings. He looks at the gap between gold’s paper price and the physical metal price, which is becoming harder to obtain. This is a positive sign, hardly surprising considering what is going on in the world. If you want to buy physical metal, don’t be put off, because the gap is likely to widen as the price advances before physical metal becomes unobtainable—except at very high prices.